Farm Management Software Blog

A few years ago the Farm Financial Standards Council--which promotes the introduction and standardization of management accounting (M.A.) within agriculture--asked software company providing M.A. to respond to these questions:

1. Who's the target audience for management accounting? 2. Who's not the target audience? 3. What are the prerequisites for success?4. What specific benefits are farmers achieving from M.A.?5. What are the opportunities for partnering with professional financial service providers?

Here are the responses to the first three questions:

1. Who can benefit from Management Accounting?

Although any operation can technically benefit from knowing and managing costs, not everyone is ready for M.A. The early adopters all share one or more of these characteristics:

Strong management focus

Well-defined management segments and specialized responsibilities

Tend to be "splitters" rather than "lumpers"

Already familiar with M.A.

Require monthly or quarterly financial reporting

Have reached a plateau due to the limitations of the traditional "adjusted accrual" approach and/or "generic" accounting packages like Quickbooks, MAS 90, Great Plains, etc.

Larger operations ($2 million in sales and above) are logical (but not exclusive) candidates

2. How do you know you're not a candidate for M.A.?

You place a low priority and value on management information

You don't like structure and accounting standards

You're not going to use the knowledge to make decisions

You're impatient (everyone agrees the "end result" requires at least two years since each season / production cycle takes time and requires adjustments and refinements)

3. What are the prerequisites for success?

Internal controller and/or MIS "champion"

Awareness and appreciation for management accounting

Active involvement by accountant or financial consultant

Strong "information culture"

Inventory control (the greatest limiting factor in any level of farm records)

Timeliness

Delegation

Commitment to continuous improvement

In upcoming posts we'll review some of the (unexpected) benefits that farmers are discovering from M.A., as well as some exciting opportunities to partner with financial professionals.